The legendary advice coming from most forex traders is “just stick to your rules”. There is no doubt that all traders who follow the firm set or rules succeed, however, this advice is obvious and doesn’t help much. We all know that rules are made to be followed, however the big question is whether there are any psychological tricks or a set of routines to help out when emotions take over your common trading sense and you wiggle off the right path.
Let Mistakes Bring the Pain
I believe that in order to overcome breaking the rules you have to discipline yourself the hard way. Learning by mistakes is the perfect way of punishment! Once you lose about $1,000 in a second because of ignoring your trading plan, you will grimace in pain and think twice before going down that road again!
Time-Out Discipline in Forex Trading
The only way you can ever control yourself is to build “time-out” penalty. Time-out technique is a well-known, proven trick used in training dogs and even in correcting bad behavior in children. The idea behind time-out is “lack of attention” for a certain period of time followed by unacceptable behavior. If the isolation from interaction works wonders on both puppies and kids, why can’t the grown up do the same?!
The usual time frame of the time-out discipline is 1 minute per each year of age. In my case, 30 minutes will not be enough to truly sink! Therefore, my way of time-out is simple – whenever I screw up a trade because of breaking the rules, I am not allowed to make any more trades for the whole week.
During the “punishment” week you can spend time reflecting on your mistakes, go though the trading journal, write down the emotions you faced and refocus. When the time-out because of breaking the rules is over, you are back to forex trading, sadder but wiser and your head is clear!
Trace Your Actions Before Placing a Trade
Another technique to overcome the rules breaking is to revise your trading plan, go through the checklist of reasons why this particular trade is worth it and basically stop to think before placing a trade.
Use Bar Chart Instead of Candles to Follow the Rules
Candle pattern is very attractive and fun to watch, however at some point starring at green and red candles while waiting for the right moment can turn into dreadful hangover! To cure the headache, switch to bar charts instead. This definitely allows the trader to be less emotionally involved and, in my point of view, it is much easier to spot the possible support/resistance levels with bar charts.
As far as there are rules, they will be broken. The real forex trading challenge is to control your emotions, not let deperation, over-eagerness, fear of missing out govern your decisions and grab yourself the moment you have broken the trading rule and get out of the trade at the first possible exit.